Pushing the Economy Forward

The recent discoveries of natural gas reserves in the US is helping to expand the US economy and are also projected to continue driving this growth into the future. The fact of the matter is natural gas in the North American region is abundant and affordable which in turn significantly drives up job creation and again our economic growth.

The shale boom has made American factories more competitive than recent years and has sparked a domestic manufacturing renaissance, leading to capital investment, new high-wage manufacturing jobs, and an increase in US exports of added value product.

The U.S. is the world’s largest manufacturing economy, and growth in domestic manufacturing has a multiplier effect on the broader state of the economy.

Here are several examples of how the multiplier effect works:

First, manufacturing creates more jobs outside its own sector than any other industry. For every one manufacturing job, there are five additional domestic jobs. Hence, creating more jobs within the manufacturing industry will create five times more domestic jobs which will stimulate economic growth.

Second, manufacturing also creates value-added products for export. Meaning instead of exporting simple raw materials, every dollar invested in domestic manufacturing creates a portion of income from finished products.

Lastly, manufacturing drives innovation. Manufacturing companies are starting to realize it is more efficient to conduct research and development near or on their factory floors than anywhere else. The countries who investment more in these manufacturing sectors have a head start in the development of next generation products.

Now is the time when our policy makers have an opportunity to grow America’s vital manufacturing sector through a sensible, all-encompassing natural gas policy that will allow for the manufacturing companies to use natural gas for production and in turn push the economy forward.

Manufacturing is very sensitive to natural gas, which powers many of its operations and supplies the raw components of thousands of essential products. When the price of natural gas is high, companies cannot afford to operate and thus are not as efficient as a company who can operate with natural gas at a lower cost. This is why America is a manufacturing company’s dream place to operate; the US offers some of the lowest prices on natural gas out of any country. As the demand for natural gas in the US continues to rise, it pushes the economy to new heights and will continue to push the economy forward into future years.

LNG, What’s the big deal?

LNG is the key piece in making natural gas an internationally traded commodity, without it, supply and demand of the resource would be far out of balance.  Beyond this, LNG is important in the growing natural gas industry because it allows for the extraction from tough to reach reserves; it can be shipped efficiently and safely, and a has potentially great upside for exporting countries.

The largest benefit of LNG is that it opens up natural gas to world trade.  Prior to the technology which allows us to transform natural gas into its liquid state, natural gas could only be distributed regionally through gas pipelines.  This not only restricted the trade of natural gas, it also restricted the markets ability to grow.  For instance, Australia is currently producing two times more gas than what it consumes.  If it were to have no way to ship this excess over seas, the country would have no incentive to produce its maximum capacity of natural gas and their abundant supply would be a waste since it can’t get to countries who need the energy.

Top 6 exporters of LNG in 2011:

Thankfully however, we now have the ability to super cool natural gas to -162 degrees C, at which point the gas turns into its liquid state. Once in its liquid state, natural gas is 1/600 that of its gaseous volume, meaning that we can transport natural gas on tankers at and economic cost.

With the ability to ship LNG globally comes the ability to import and export natural gas.  Thus, countries such as Qatar and Australia have incentive to produce as much LNG as possible for export.  This benefits both the exporting countries economically and the importing countries because they now have the supply to meet their consumption, The Economist.

While LNG is the key to the international trade of natural gas, it is also important because we now have the ability to tap large natural gas reserves that were once considered inaccessible.  Prior to LNG, we were unable to tap any reserves that were much more than a few miles off any coast because the amount of pipeline that had to be laid under the ocean was unfeasible.  With LNG and LNG specific tankers, we are now able to pump what is extracted from these reserves directly into these ships for super cooling and transport.

By pumping extracted natural gas at sea directly onto the ships, not only are time and money being saved but the detrimental impact on the environment is being reduced.  When LNG is stored, it is put under no pressure and therefore is not explosive.  The ships that transport LNG are some of the most high tech on the sea with double hulls and massive amounts of insulation to prevent any sort of leak.  Even though a spill is not of great fear considering the quality of these ships, the impacts of and LNG spill would be minimal in that LNG is insoluble in water and would all evaporate in a matter of minutes.

The inside membrane of a LNG tanker, Chevron:

LNG has opened the world to natural gas trade providing import opportunities for countries lacking the resource, and export opportunities for countries fortunate enough to have excess.  It has allowed for the market to expand to new heights and with continued exploration by the worlds gas companies, the outlook is only bright for LNG.

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Why is Liquefied Natural Gas (LNG) so important?

For starters, LNG is a key ingredient in making natural gas an internationally traded commodity, without this resource in use, the supply and demand for natural gas as a whole would dwindle. Not only that, but new developments have made the transportation of LNG across boarders easier and safer, which makes exporting and importing this resource more attractive.

In order to make LNG and other natural gas resources a globally traded commodity, countries with high reserves need to start exporting the natural gas to those countries with little to no reserves in natural gas.

For example, Russia has the largest number of natural gas reserves in the world; so much in fact that if they decided to export all of their reserves, they could power the entire world for several years alone.

On the other hand the United States has already taken steps towards becoming a net exporter of natural gas. There are plans to create a pipeline from the North Alaskan Coast inland. This project would not only provide many jobs for the unemployed, but also huge revenue for the state of Alaska. 2021 is the target year to have the pipeline fully up and running.

Now that natural gas is becoming a more popular use of energy, it would be a smart investment for countries to export their reserves into the global market. The use of natural gas has come a long way in the past couple years and it is projected to be the energy of the future.

This is from a 3-D animation tutorial of how the natural gas companies (Shell) turn natural gas into a liquid.

New Investment Opportunities In the Natural Gas Industry

Now that the U.S. economy has started to recover from its recent recession, many Americans are asking the same question: where is the safest and smartest place to invest their money? The natural gas boom currently in action is one of the most important trends affecting the American economy and it would be the smartest choice to invest in this new era of sustainable energy.

According to Forbes’ “Energy Forecast 2013-2014,” the outlook for energy in the next two years is surprisingly diverse. Oil and gas prices are expected to remain high while natural gas prices continue to fall increasing the gap between the two fuels to unprecedented levels.

Oil and gas prices are unreliable and unpredictable because it changes on a daily basis which makes it an unstable investment. For example, on February 11, 2013 it was reported that gas prices rose every day for 25 days straight, reaching a national average of $3.59 per gallon, the most expensive national average recorded on February 11. Within these two weeks, gas prices increased by 25 cents which was the biggest jump in prices in over a year. Even though gas prices constantly change future expectations remain high for its price level.

Oil prices are expected to remain high because of the limited supply and increase in demand. There is a limited supply of gas and its liquid derivatives in the world and this is why oil prices are constantly increasing. On the other hand, natural gas will continue to be cheap in the North American market because supply is greater than our demand. Although new drilling is declining, a well that has been drilled will continue to be productive long after prices have fallen. Operating costs are tiny in most cases, so natural gas will continue to move into the world market.

Here are some companies to keep an eye on for future investments.

Natural gas is replacing dirtier and more expensive sources of fuel like coal at a rapid peace, and this increases demand for transportation, storage and all kind of related services. That is why, Enterprise Products Partners (NYSE: EPD), a company that transports and processes natural gas, natural gas liquids, crude oil, refined products and petrochemicals, will have such a profitable future because the demand for transportation of natural gas is on the rise and will continue to be in high demand as the demand for natural gas increases.

The company is in the process of developing a new 270-mile pipeline header system that will deliver ethane to petrochemical plants in the Gulf Coast region, and it’s in the position of accumulating all of the benefits from the increase in demand of LNG. Being a natural monopoly, competition is not a big problem and, in addition to all this, investors in this master limited partnership are getting a 4.4% dividend yield.

Companies like Westport Innovations (NASDAQ: WPRT) and Clean Energy Fuels (NASDAQ: CLNE) have many things in common, to begin with: both companies are betting on LNG as a cheaper and more efficient fuel for vehicles. Westport is in the business of building engine conversion technologies, and it has partnerships with giant like Caterpillar and Cummins. Westport has been increasing sales rapidly over the last years, and gross margins are on the rise too.

Here is the bottom line, the natural gas industry has only just begun its first stages and will provide many opportunities for its investors over the next few years. If you are willing to take the risks and commit to long term investments, disruptive plays like Westport and Clean Energy Fuels can potentially deliver amazing returns if LNG continues to gain traction as the fuel of our future.

Natural Gas Powering Industry

There have been many new developments in the realm of natural gas over the past few years. One of the most ground breaking new inventions is the ability for Natural Gas to be used in power generation. Originally Natural Gas was converted into energy in a typical combustion system. However, with the advancement in technology the excess heat given off from the combustion cycle can now be funneled through a heat transfer system that reacts with water, causing it to boil and become steam. This steam is then utilized to power a secondary generator. Thus, generating twice as much electricity as the tradition combustion process. This increase in efficiency can dramatically increase the level of electricity that can be created using Natural Gas.

This link provides one example of one of these new systems. Heat Capture System
For a more detailed description of the process, the U.S. Environmental Protection Agency has released a brief description of the process.

While being able to harness electricity from Natural Gas is a vital leap forward, this is only one sector and we have to expand the use of this resource to encompass a greater aspect of our energy sector.

While there have been many advancements in electricity generation, Natural Gas is also helping to reshape the automotive industry. The complex process of using Natural Gas as an automotive fuel begins by firstly cooling the gas into its liquid form or compressing it. The cooling process requires the temperature of the gas to reach -260 degrees fahrenheit before it transforms into a liquid. The new LNG(Liquid Natural Gas) must be kept cool for it to remain a liquid. The compressed gas must be kept in a pressurized tank. LNG is a more efficient fuel source because it is denser then traditional Natural Gas and therefore stores more energy per unit. Traditionally the LNG will be stored in double insulated vacuum sealed containers similar to Compressed Natural Gas (CNG).

Below is an example of how this gas would be stored in a commercial vehicle. Many companies are in the process of designing prototype vehicles with expected release dates within the next decade. These vehicles will be either LNG as previously mentioned or a less costly process of compressed natural gas.

Manufactures have found that CNG many be more efficient for passenger cars where LNG would be preferable to larger transportation vehicles such as trucks.

The idea of Natural Gas has become so prominent, Shell has recently announced it will be adding LNG and CNG to its portfolio of energy resources.

As the technology matures and new breakthroughs are made, I believe that we will see further development of Natural Gas in both the industries of power generation and as fuel source for vehicles. There are many exciting research proposals waiting to be funded and it seems like there is very little Natural Gas cannot replace.

Liquefied Natural Gas (LNG) Export Controversies in the US

For the past 20 years, the US has been an importer of natural gas with an average of 15.7 percent of its annual consumption coming from Canada. However, the production of this resource in the US has risen over 25 percent since 2005, which comes primarily from the previously inaccessible shale deposits deep in the earth, and is expected to continue growing in the future.

Presently, the production of natural gas in the US is greater than its national consumption and is causing quite the controversy on whether or not the US should export the resource in the global market. A few years ago, liquefied natural gas (LNG) import terminals were constructed across North America in response to the country’s diminishing natural gas supplies. Today, due to the rise of production, major natural gas companies in the US are trying to convert these terminals into export terminals which will transport LNG overseas.

Cheniere Energy Inc., a natural gas company based out of Houston, TX, is the only company in the US with an approved LNG terminal. It was in January of 2012 when Cheniere Energy was given approval by the Department of Energy to export LNG through its Sabine Pass Liquefaction terminal in Cameron Parish, LA, which has the potential to ship up to 2 billion cubic feet of gas per day by the year 2015. The company also intends to open a new export terminal in Corpus Christi, TX by 2017 but will only see production if Cheniere gets the approval.

Chevron’s Gorgon project in Australia.

Other US natural gas companies, who are unable to export domestically, have turned to alternative plans by building exporting facilities on foreign soil (where there are little to no restrictions on natural gas production). For example, Chevron Corporation is one of the leading suppliers of LNG exports with its Wheatstone and Gorgon projects in Australia. The Gorgon Project is Australia’s largest single-resource project, with a 15 million-metric ton per-year LNG facility.

KBR Inc., another US company, is a leading LNG production facility developer, with already having constructed over 40% of LNG facilities around the world.

What is causing all the controversy over exporting LNG?

Industrial consumers of natural gas are worried the exportation of natural gas will increase oil and natural gas prices as well as their production costs.

Alliances are starting to form together and fight against the approval given by the Department of Energy for exporting natural gas. The alliances include utilities dependent on natural gas to fuel electricity generation, chemical companies that use it as a feedstock for making myriad industrial chemicals, and heavy industrial users such Alcoa and Nucor who use natural gas to fire their metal-making operations.

America’s Energy Advantage, a group backed by six large industrial companies including Dow Chemical, Huntsman, and Alcoa, believe tens of billions of dollars for potential investment in US industry are at risk if the government allows for the substantial increase in exported LNG. The group also argues an increase in exporting LNG will hurt the US economy by eliminating domestic jobs and increase natural gas prices.

Today the US price of natural gas is $3.27 per thousand cubic feet, compare this  price to those in the world market, you will see the Europeans pay upwards of $12 per thousand cubic feet and the Japanese pay more than $17. If the US were to start exporting, domestic natural gas prices will increase significantly.

It looks like right now the controversies surrounding natural gas production and exportation in the US will only get resolved if there can be an agreement on some sort of compromise otherwise the issue will never go away.

thenaturalgas ALTERNATIVES

Shell Floating LNG Plant

The most recent big development in the area of natural gas exploration is the movement towards FLNG or floating liquefied natural gas, and Shell is leading the charge.  With the development of their Prelude project, Shell is poised to be the first company in the world to create a vessel or platform which can extract remote deposits of LNG according to Bloomberg.  The ability to tap additional reserves of LNG means not only advancement in the movement towards natural gas energy but further economic development for Australia and less environmental impacts.

The $10.8-12.6 billion project means constructing the largest vessel on Earth at a weight of 600,000 tonnes and a length nearly equal to that of the Empire State Building.  The construction of the hull began at Samsung Heavy Industries in South Korea in 2009 and the project is set to begin operation over the Prelude LNG reserve in 2015.  The vessel will be towed to the Prelude reserve after completion and moored at said location for 25 years.

Extracting LNG from remote deposits at sea has always been a sought after goal for natural gas companies but was never economical because locations were either too remote or the costs were astronomical with the amount of pipeline and energy it would take to get the LNG to coastal plants.  Thanks to groundbreaking technology however, scientists have found that by chilling the extracted LNG to -162 degrees Celsius, the volume of LNG can be shrunk by 600 times what it is in its natural state.  Thus allowing for enormous amounts of LNG to be shipped to mainland rather than pumped through pipelines.

The benefits for northwest Australia and Australia as a whole will be immense both environmentally and economically.  The permits to build LNG plants on land in Australia have become few and far between recently and with seven plants currently under construction, they will be even more rare to acquire.  In a sense, the LNG industry is capped at the moment in Australia with nowhere to expand to.  However with the arrival of FLNG plants, the gates are again open for companies to explore and tap previously inaccessible LNG reserves, meaning many more jobs for Australian workers and more money for Australia to tax.

Not only is the development of FLNG good for the Australian economy, it is also a more environmentally responsible means of natural gas extraction.  Thanks to the ability to condense the extracted LNG for transportation, pipelines are virtually eliminated in this segment of the market meaning that there is more LNG production with no more pipelines taking up land.  LNG plants are also more environmentally friendly because it again adds to LNG production while not needing land to be developed for roads, laydown areas, and accommodation facilities.

FLNG plants are becoming a significant part of LNG exploration. With their potential to provide more LNG, stimulate the Australian economy, and do so in a more environmentally responsible manor, this will likely become a much more popular form of exploration and extraction for companies around the world.

thenaturalgas ALTERNATIVE